FOR RELEASE 2:30 P.M. EST

ADDRESS

BY

ATTORNEY GENERAL JOHN N. MITCHELL

BEFORE

DELTA COUNCIL ANNUAL MEETING

C1e~e1and, Mississippi

May 19, 1970

A New Steadiness of Progre~s

I think this is a good time for some plain talk about

the economy~ the stock market, and the overall strategy of

this Administration.

When I first came to Washington, there were those ~ho

said "What does a Wall Street lawyer know about being Attorney

General?"

And when I discuss the economy today, I am sure there'

will be some who will say "What does an Attorney General know

about Wall Street?"

I underatand there is a movement afoot, based on the

recent stock market decline, to revise the conflict-of-interest

reguiations. Under the new plan, government appointees would be

required not to sell their stocks when they take office.

There seems to be a longstandi~g tradition in Washi~gton

that says that the securities markets are not a proper subject

for discussion.

One reason for this tradition is this: Wall Street was

once the habitat of men in silk hats and diamond stickpins;

and no self-respecti~g poli tical figure could afford to be

associated with them.

Another reason is this: Communists' propaganda for a

century has been depicting Wall Street a~ the nerve center

for all warmongering.

And finally, there was a practical reason: no soothing

syrup manufactured in the corridors of power has any effect

on a market that wants to go down.

The first two of those reasons are no longer valid.

With 28 million American stockholders affected by the

market, a, government that is compassionate about unemployment

must also be concerned about "uninvestment."

And with peace the most bullish element in the market

in our times, the ~yth of the Wall Street warmo~ger has been

expl~ded forever. With no disrespect intended to the symbol

of the Soviets, war is obviously bearish.

That third reason, though, remains cause for hesitation-­

if government cannot do anything about market fluctuations,

why should government say anything about them?

I believe there is a basic fallacy in that question.

It assumes that when a, bull market is roaring along, all a

government can do is ,bask in reflected glory; and it assumes

that when a bear market comes along, all a government can do

is grind out statements of rosy reassurance.

But clouds of pessimism are never dispelled by statements

of sweetness and light. Confidence is not issued, confidence

must be built.

When I was on Wall Street, the degree of my own confidence

was affected by the elements of certainty in any situation.

The track record of management is a basic element of certainty,

both in business and government, and the track record of this

Administration in doing what it says it will do is worth your

consideration.

Let me begin, then, by acknowledging this: investors

large and small are suffering. And the Administration is

properly quite concerned about it, ~specially since many

decisions in the securities market are being ba~ed 6n fears

rather than on facts.

In that regard, let me answer a question that has been

often asked in the past few months: to what d~gtee does govern­

ment take the stock market into account in maki~g, its economic

decisions?

The answer, in a word, is "some." Wall Streeters themselves

know that the market is traditionally a notorious overreactor,

where economic trends are reflected in wide and sometimes

irrational swings. They know, too, that the market is not

always an accurate indicat~r; someone recently paraphrased

Paul Samuelson by saying that the market has predicted "eleven

out of the last four· recessions."

At the same time, the market is an accurate measure of

investor confidence, and has a real effect on both cons~mer and

capital spending. To ignore this would be putt~ng your head

in the sand, and that is one thing this Administration does

not do.

Therefore, it is important that the inflation psychology

of last year not be replaced by.any recession psychology, but

by the psychology of price stability and economic growth. The

key to this psychology of stability is confidence .

. How is confidence earned?

First, by the establishment of a. good track record over

a period of time, as you do what you say you will do. Secona,

by the evidence of success in the goals you have set.

Let us examine the track record in it~ broadest perspective,

because confidence rests on far more than economic matters

alone. In essence, we are talking about a new steadiness of

progress that will come with world order, economic order, and

social order.

This Administration took office pledging to end the war

in Vietnam in a way that would permit the people of South

Vietnam to decide their own form of government. The basic

measure of our involvement in that war is the number of our

troops in that country. There are 115,000 fewer American

troops there than were there before. That, I submit, is a

t r a c k r e co rd ; when the Pres i den t pIed.ge s towi thdr aw 150 J 000

more in a yearts time, you can look to that track record for

full confidence that he will do what he says he will do.

Further, the President announced the limited scope and

length of time of our action to clean out the Cambodian

sanctuaries, and thereby make life safer for the troops not

yet bro~ght hpme. Some people here at home cast their minds

back to the mid~Sixties and jumped to the conclusion that no

President could be believed. Today, some of the U. S.

troops sent into Cambodia have already returned, and the

remainder will be out within the deadline that the President

imposed. Again, the President is doing what he said he would do.

Let me turn now to the economic scene to examine the track

record. As confidence is a function of progress toward world

order, it is aiso a function of economic order.

The President said that to curb inflation, he would gain

command over the powerful momentum of increased Federal

spending,_ The revised budget figures which are to be released

soon will vividly illustrate that the President is doing

what he said he would do.

From fiscal 1965 until 1969, the average increase in

Federal spending was over 13% every year. In fiscal 1970

which ends this coming June 30, that momentum was cut to

about 7.4%; and in the coming year, the budget increase will

be cut in half again. When you consider some rise in prices,

that means there will be no increase in real Federal spending

next year. That, I submit, is a track record that should

convince even the most skeptical about our intention to redeem

our pledges. It was achieved under the most intense pressure

from some spenders in Congress to continue the policies of

the past.

A small deficit, caused by a shortfall in revenues, is

now projected for fiscal 1970 and 1971. We do well to

remember that rapid expenditure increases and consequent huge

deficits of the Sixties were the prime cause of inflation today;

but a small deficit that comes as a result of the economy

taking a brief breathing spell is, I submit, not a cause for

concern, as long as we are keeping expenditures within the

basic revenue capacity of the tax system.

Another example: at a time last year when inflation

psyc!l0lOiY was rampant, the President made clear that he

intended to help cool the overheated economy. At the time,

not everyone believed it would actually happen, but now-­

to put it mildly--there seems to be universal agreement that

the economy is no longer raci~g at an unsustainable pace.

We have done what we said we had to do.

We also said, you will recall, that price indexes would be

the last of the inflation indicators to slow down. Nobody·

will deny that the rate of increase, which had been steadily

rising to over six percent, has leveled off; as a matter of

fact, there is considerable evidence that the rate of increase

of prices has' been headed downward lately. This includes

food prices, the most important component of all to the consumer.

For those whose eyes are fixed on the financial tables in the

newspapers, I would suggest they also glance at the food

advertisements to see concrete progress in the fight against

inflation.

The President also said that he did not believe it was

necessary to induce a recession in order to curb inflation.

He and his economic advisers pointed out that the time to

ease restraints was well before the ultimate results of price­

slowing became apparent.

Accordingly, in the past few months we have seen the

predicted moves to ease restraints. The removal of voluntary

restraints on Federally-aided state and local construction

was a small- step in this direction; more significantly, the

independent Federal Reserve Board has been in~reasing the

money supply at an annual rate of 4% since January, after a

long period of no growth at all. Again, we have done what we

said what we were going to do, and the Fed has now done what

we said we hoped it would do.

We made it clear that we would not impose wage and price

controls, since we were determined to deal with the causes rather

than the symptoms of inflation. This is an especially hard

ghost to lay 'to rest, since it offers what may appear to be a

snap solution. But wage and price controls, with the rationing,

black marketeering and government domination that follow in

their wake, are not now and never have been a part of our

economic strategy. Forget about them.

We said we were willing to trade off speed in reduci~g price

increases in order to avert the hardships of dislocation and

high unemployment. I believe that is a trade that the American

people are willing to make. It takes longer, but no one group

should have to bear all the burden of establishi~g a sound

prosperity.

Now, after coming this far, some people are worried that

we- will throwaway the progress we have made and let the

economy go off to the races again. If they would only consider

the track record, they would see how unlikely an eventuality

that is. We did not cave in before, and we will not cave in \.

now or later--on the contrary, we will encourage a sustainable

rate of economic growth. That sustainable growth will be quite

evident in the second half of this year. Sustainable is the

key word, and steadiness of progress is the key concept.

Just as we do not intend to put the economy thro~gh the

wringer so we do not intend to pump the economy into a booming

inflation again. Our prudence on the budget, and the moderation

of Federal R~serve policy show that.

It is interesting to note at this point that most of the

worriers on Wali Street are divided into those who worry about

whether our policy to curb inflation will be ~successful, and

those who worry that the fight against inflation will be too

successful. I urge both groups to consider the benefits

that will accrue to the nation and to themselves when we bring

about a new ste.diness of progress.

No single industry is more harshly whipsawed by inflation

than the securities industry. A runaway economy makes specu­

lators out of many investors who should not be, induces

reputable firms to expand too rapidly to absorb the explosion

of business, and threatens their stability when the bonanza

turns out to be transitory, as it always does.

A new ~teadiness of progress, therefore, will offer

stability of prices to the consumer, opportunity to the wage

earner and the investor, and a less frene~ic and more rewarding

way of life to the people who make their livi~g in Wall Street.

So far today, I have spoken of what we have done to bring

about order in a divided world, and order in an inflateq

economy. As I se~ it, order is not an end in itself--it is

the only democratic way to more freedom, more justice, more

change for the better. In that spirit, let us examine briefly

. the third great area in which order is necessary: in the way

we live with one another.

There can be no. greater evidence of disorder in-society

than the sound of gunfire on a college campus. From Kent State

to Jackson State, we have seen the citadels of reason turn

into fortresses of force, and as a result the nation has

witnessed the saddest semester in the history of American

education.

I will not offer judgments now on matters under urgent

investigation, but I will say this: this is a nation determined

to live within the law, neither violent demonstrations nor

unrestrained reactions are part of that law. There are

200 million innocent bystanders in America who must be

protected, and the first duty of the peacekeeping forces is

to protect ,the innocent.

The hope for order in our society goes far beyond 'the

intell~ient use of restraint in keeping the peace; it draws

upon the natural revulsion to violence on the part of the

American people, which is making itself felt now within

every, group and each generation.

In this regard, 'it is a hopeful s~gn that the increase

in crime in this country is b~ginni~g to come under some control.

We are still far from our goal, but the explosive rate of

increase has been cut in half. Moreover, one of the greatest

contributors to crime, the dr~g traffic, is under an attack

the likes of which it has never seen before. This attack is

especially directed at the suppliers and pushers who prey most

viciously on our young people.

There are times when the shock of tr~gedy awaken a people

to the futility of violent actions and reactions. and I believe

we are going through such a time. This Administration will do

everything that responsive leadership and cool judgment cari do,

to hasten the return 'to the tradition of peaceful change.

Perhaps I have tried to do too much today, in relating

our efforts as a nation to achieve internatiortal order,

economic order, and social order.

But that is what the Federal government is elected to

do--to see the problems of this nation as a whole, and to take

action along a broa~ front, not benefit1~g\ one group or one

area at the expense of others, but acti~g in a way that widens

the horizons for all.

That is why I have not limited this talk to businessmen

to the subject 9fbusiness, and why we cannot deal with the

pervasive idea of confidence in terms of money and markets

alone .

.This Administration has a strat~gy. Let me make it

plain that it is a national strategy, a strat~gy of reform

of national affairs to bri~g about a new steadiness of pr~gress.

We are convinced that this strategy will work. We have

some evidence that it is beginning to work already, especially

in the economic field. We intend to pe~severeJ' and you as

businessmen would do well to make your plans and investments

on the basis of the elements of certainty provided by a

. government that already has a record of doing what it said

it would do.

Our strategy is fallible, but it is not frantic; it is

sounder, we believe, than any other strategy we have heard,

and has certainly been better than the makeshift policy of

the past.

Nobody can assure you that this strategy is perfect, but

let me assure you here and now that it will be followed.'

We will be sensitive to trends, and will adapt our tactics,

but there will be no flip-flops in the basic des~gn.

The people put a man in the Oval Office to take the long

view, and to act in the best interests of all the people.

That is what he is doi~g now. I am confident that it will

become increasi~gly apparent that~-in our time and with this

President--it is not a good idea to sell this country short.